Incidentally, on July 9, the company announced that it expects to achieve net profit of 487 million yuan in the second quarter, an increase of 91.1% over the first quarter; the company expects to achieve net profit of 742 million yuan in the first half of the year, an increase of 83% over the previous year. Continued high building materials prices guarantee that the company's operating profit benefited from the continuous advancement of the country's supply-side structural reforms to prevent the resurgence of “ground steel” and the impact of further environmental protection inspections. Steel prices continued to operate at a high level in the first half of the year. According to the company's annual report data, the company's products are mainly bar and wire, and it is the largest rod and wire production base in Northeast China. According to Steel Union data, in the first half of 2018, the average price of HRB 400:20 mm rebar in Shenyang was 3,898 yuan/ton, which is 425 yuan/ton higher than the average price of 3,473 yuan/ton in the first half of 2017. The price of building materials continued to operate at a high level, maintaining the company's high profit in the first half of the year. The geographical location highlights its advantages, and demand for its main products is strong. The company is located at the junction of the three provinces of Liaoning, Hebei, and Inner Mongolia. It is a major transportation route connecting Northeast China with North China, eastern Inner Mongolia, and even Mongolia and coastal ports. During the production limit period of the “2+26” heating season in 2017, the company was not within the production limit area. On the one hand, the company guaranteed the company's steel production, and on the other hand, the company made up for the contraction in supply due to production restrictions in the production limit area, which guaranteed the company's profit level. The number of cities with production restrictions during the non-heating season continued to increase in 2018, and the scope of influence continued to expand. Thanks to the company's excellent location, the company's sales are expected to remain good in the second half of the year, and profits are expected to continue to operate at a high level in the second half of the year. North Korea's shift to economic development companies may benefit from North Korea's political transformation and economic construction. As its land and land border country, China may become an important supporter of its economic development. North Korea is only separated by a river from Liaoning. As the main rod and wire production base in the province and even in Northeast China, the company has advantages in variety and location, and is expected to directly benefit later. The company's operations are stable, and the company's profit sustainability is strong. There is a sharp increase in profit compared to profit, but the company's profit per ton of steel in the first half of the year was still in the middle of the industry, which deviates from expectations. On the other hand, the company implemented a dividend dividend mechanism for the 2017 annual equity distribution, which diluted EPS as a whole. Therefore, we expect the company's EPS to be reduced from 0.96 yuan and 1.06 yuan to 0.59 yuan and 0.66 yuan in 2018-2019, the company's EPS is expected to be 0.67 yuan in 2020, and the target price will be lowered from 6.00 yuan to 4.00 yuan. Based on the closing price on July 9, PE corresponding to 2018-2020 was 5.85 times, 5.21 times, and 5.16 times, respectively, maintaining the buy rating. Risk warning: Changes in the relationship between China and North Korea, contraction in the company's net profit due to falling steel prices, changes in production due to production and maintenance of the company's equipment, and changes in three expenses due to the company's own management.